News

The Daily

NEWS HIGHLIGHTS FOR FRIDAY - 3.11.16

By:

Maya Lindsay

Published Date:

Mar 11, 2016

Accounting and Financial News Stories

IRS to Fix Controls over Obamacare Tax CreditsAccounting TodayThe Internal Revenue Service plans to strengthen its controls over the accounting for the Premium Tax Credit, which helps subsidize health insurance premiums under the Affordable Care Act, after a government watchdog found discrepancies of $447 million. A report from the Treasury Inspector General for Tax Administration found that controls over the financial accounting for fund outlays and disbursements associated with the PTC should be improved. Specifically, TIGTA found errors in the IRS financial accounting and reporting of PTC-related fund outlays. The Patient Protection and Affordable Care Act created the Premium Tax Credit to help eligible individuals pay for their health insurance premiums.

IRS Moving Forward With Private Debt Collection ProgramJD Supra Business AdvisorIRS Commissioner John Koskinen recently announced that the IRS is moving forward with a program to have private companies enter into contracts to collect tax debts. Commissioner Koskinen expected that the new private debt collection program would be in place around by April 2017, although Senate Finance Committee member Chuck Grassley is pushing the IRS to implement the private debt collection program on a faster time table. It will be interesting to see how the program will deal with the massive problem of tax collection scams that is already plaguing the IRS and taxpayers.

Tax Foundation Compares State Sales Tax RatesAccounting TodayThe Tax Foundation has released an updated report on sales taxes throughout the states in 2016, indicating where the highest and lowest state and local sales tax rates are across the country. The report details the combined state and average local sales tax rates for each state and explains how sales taxes fit into a state’s overall tax structure. Forty-five states and the District of Columbia collect statewide sales taxes, according to the report, and local sales taxes are collected in 38 states. The five states with the highest average combined state and local sales tax rates are Tennessee (9.46 percent), Arkansas (9.30 percent), Louisiana (9.0 percent), Alabama (8.97 percent), and Washington (8.90 percent).

Tax Revenues Are Starting to Slow in Most StatesGoverning.comThe outlook for tax revenues in many states isn’t particularly rosy. Tax collections are starting to slow, meaning lawmakers in many states will have sizable budget shortfalls to close. A Rockefeller Institute report released this week depicts weaker tax revenue growth or slight declines for most states. State personal income tax receipts are expected to grow a median of 4.6 percent in fiscal year 2016 and 4.4 percent in fiscal 2017, compared with 7.8 percent last year. Sales taxes are similarly expected to rise by a median of just 3.5 percent this year and 3.9 percent in fiscal 2017, down from 4.5 percent growth last year.

There is a 'game changer' technology on Wall Street and people keep confusing it with bitcoinBusiness InsiderWall Street banks are buzzing about blockchain. Goldman Sachs says the technology "has the potential to redefine transactions" and can change "everything." JPMorgan last month announced it was launching a trial project with the blockchain startup led by its former executive, Blythe Masters. Her company, Digital Asset Holdings, has secured funding from Goldman, Citi, ICAP, and a boatload of other financial firms. If you're wondering what a blockchain actually is, or how its works, you're not alone. Autonomous Research, which calls the technology a "game changer," has released a report to answer all of your blockchain questions.

Professor to Wall Street: You're Doing Swaps Accounting WrongBloomberg BusinessThe world’s largest banks are incorrectly accounting for their swaps trades, locking up money that could otherwise be paid out as dividends to their shareholders, according to a bold new academic paper. The transactions are funded with money that’s borrowed from the bank’s treasury, and currently that lending cost is deducted from the value of the derivatives. That’s a mistake, according to Darrell Duffie, one of the report’s authors who argues banks should instead charge their trading partners more up-front for the deals, freeing up cash. By calling out Wall Street accounting conventions, Duffie is in familiar territory. The Stanford University finance professor has already helped spur changes in how banks value credit risk and debt.

AICPA Recommends Changes in IRS Offshore Voluntary Disclosure ProgramAccounting TodayThe American Institute of CPAs recommended the Treasury Department and the Internal Revenue Service make a number of changes to improve the Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures that allow U.S. taxpayers to voluntarily disclose previously unreported offshore assets and comply with U.S. tax laws. “The remarkable success of these programs is greatly attributable to their fairness and the absence of unnecessarily punitive penalties on those taxpayers eligible to participate,” AICPA Tax Executive Committee chair Troy L. Lewis wrote in a letter Wednesday to top Treasury and IRS officials.

New York Challenges a Tax Privilege of the RichNew York TimesTwo Democratic members of the New York State Assembly, Jeffrion Aubry and Sean Ryan, introduced a bill this week to close the “carried interest” loophole, which lets partners at private equity firms and hedge funds pay a greatly reduced federal tax rate on much of their income. The measure is the most innovative of several efforts in the past decade to close the loophole. Several bills in Congress on the issue have gone nowhere. Congress has also ignored repeated calls from President Obama to close the loophole. Even bipartisan calls to close the loophole — from presidential candidates as diverse as Hillary Clinton, Donald Trump, Bernie Sanders and Jeb Bush — have not moved Congress.

Aging Bull Market Has Fed in Its CornerWall Street JournalA common misperception: Bull markets die of old age. They don’t. With this week having marked the seventh anniversary of the bull market in U.S. stocks, the rally’s longevity has attracted plenty of attention. And rightly so: At 84 months, this bull run is the third-longest in history. If it continues through June, it will move to second place, trailing only the 1990s rally. That, of course, is a big if. As the past several months have shown, the history books could have been written much differently had markets fallen just a bit further. And they still could. Since the summer, the S&P 500 has suffered two separate pullbacks of more than 10% apiece, dubbed corrections in Wall Street parlance.

February Deficit Up Slightly From Year Ago, U.S. ReportsNew York TimesThe deficit in February totaled $192.6 billion, up 0.1 percent from a year ago, the Treasury announced. So far this budget year, the deficit stands at $353 billion, down 8.7 percent from the same period in 2015. That improvement is not expected to last. The Obama administration and the Congressional Budget Office are forecasting deficits for the full year that will be significantly higher than last year’s $439.1 billion, the lowest in eight years. The C.B.O. sees the deficit climbing by 24 percent, to $544 billion; the administration is more pessimistic, forecasting a deficit of $616 billion.

What Crisis? Big Ratings Firms Stronger Than EverWall Street JournalThe three big ratings firms that played a central role in the last financial crisis never got a downgrade of their own. Investors still overwhelmingly rely on Standard & Poor’s Ratings Services, Moody’s Investors Service and Fitch Ratings when deciding whether to buy bonds. The three issue more than 95% of global bond ratings, a total virtually unchanged from the pre-2008 period. Profits also are nearing all-time highs as they ride a recent wave of debt sales and push into new lines of business.